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UPS' shares rose 1.4% before the bell while FedEx's stock fell
1.6%. Financial terms of the contract, which is set to take
effect after a "transition period", were not disclosed.
UPS said the postal service's award was "significant."
USPS is the largest customer for FedEx's air-based Express
segment. The company has said it was prepared to walk away from
the 22-year relationship if the terms of the existing contract,
set to expire on Sept. 29, did not improve.
FedEx, which has been on a drive to rein in expenses to combat
sagging freight demand and a bloated cost structure, said on
Monday it would not extend its contract with USPS.
"The parties were unable to reach agreement on mutually
beneficial terms to extend the contract," FedEx said in a
securities filing.
As the No. 1 USPS domestic air contractor, FedEx had supported
the agency's Priority Mail and other quick services.
A lapse of the domestic contract with USPS would erase nearly $2
billion in annual business that funds hundreds of pilot jobs at
FedEx. However, the loss will push FedEx to reduce its air
capacity, which will benefit it in the medium term, some
analysts have said.
The parcel delivery firm is yet to reach a new contract
agreement with its pilots.
USPS' payments to FedEx shrank to about $1.73 billion in fiscal
2023, from $2.4 billion during the fiscal year ended September
2020 after the postal service shifted letters and packages from
planes to more economical trucks.
(Reporting by Ananta Agarwal and Deborah Sophia in Bengaluru;
Editing by Savio D'Souza, Varun H K and Sriraj Kalluvila)
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